In April 2017, the Government made substantial changes to funding for apprenticeship programmes. Since then, employers with an annual UK payroll bill in excess of £3 million pay the equivalent of half a percent of the excess into their own dedicated apprenticeship service account.
Who pays the Levy and how much is it?
All public and private sector organisations based in the UK are in-scope. However, currently only those with an annual payroll bill in excess of £3 million pay the Levy. The calculation for Levy payment costs are the organisations total employee earnings subject to class 1 secondary NI contributions. All organisations within England, Wales, Scotland and Northern Ireland whose payroll bill meets the criteria must pay the Levy.
How is the Levy paid?
HMRC collect Levy payments through the PAYE process in the same way as tax and National Insurance contributions. Employers calculate the amount of Levy needed, based upon the previous month’s payroll bill and must declare this to HMRC. They will then collect the Levy, with other payroll taxes, and transfer this to the employers’ apprenticeship service account.
Employers are responsible for setting up their own apprenticeship service account. Someone in the payroll department does this using the employers Government Gateway account. If your company does not have an apprenticeship account, or struggles to to set one up, UCQ can help.
How much will I have to spend?
The amount you will spend will comprise of your Levy payments plus a Government top up of 10%. Levy payments will be equivalent to 0.5% of your company’s UK payroll cost over £3 million per annum. Broadly speaking this equates to a Levy payment of £5000 for every £1 million of qualifying payroll cost. As an example, an employer with an annual UK payroll bill of £10 million could expect to pay £35,000. The Government will top this up by 10%, which means the total value of funds available will be £38,500.
What if my organisation doesn’t pay the Levy?
Smaller organisations that don’t pay the Levy can still register with the apprenticeship service and participate in this initiative, albeit with two primary limiting factors. The first limitation is that you will be required to “co-fund” any programmes you wish to run; currently (30.04.2021) government will contribute 95% towards the cost, and the employer the remaining 5% – an exception to this approach is where a large Levy paying employer agrees to transfer some of their unused funds (up to a maximum of 25%) to your organisation, in which case 100% of the cost can be covered. The second limitation for non levy paying employers, is that they can enrol up to a maximum of 10 learners to undertake approved programmes at any point in time.
We appreciate that the Apprenticeship Levy and eligibility for apprenticeship funding can be quite confusing, so get in touch if you have any questions.